In 2023, it seems like you can outsource just about anything. You might pay a company to provide first-level customer support, or you might work with a marketing agency to develop and run campaigns. You might turn to a third-party provider for HR or website development.
And, of course, companies are leaning into the benefits of outsourcing their financial services. This is one area where outsourcing is nothing new. Plenty of small and medium-sized enterprises have been contracting with bookkeepers and accountants for decades.
But in the modern era, outsourcing your financial services can look a little different (read: more convenient and effective) than ever before. As Rakesh Shah, our on-call CFO, puts it, “By outsourcing financial services, startups can focus on their core competencies while leaving financial complexities to experts.”
The evolution of financial services outsourcing
Today, outsourcing bookkeeping or accounting services looks pretty different than it did even a decade ago. Your financial pro no longer needs to come into your office, interrupting your team and necessitating an open desk. With software like QuickBooks or Xero, they can get all of the info they need from wherever they are.
The modernization of financial services outsourcing doesn’t stop there — at least for companies committed to innovation. Our team, for example, uses RetroacDev, an R&D study platform, when companies hire us to figure out their R&D tax credit. This means we leverage machine learning to calculate and substantiate your credit. Outsourcing means your company doesn’t need to figure out how to pay for seats in RetroacDec. Instead, you just need to hire a financial pro who’s already using it.
And it’s not just the tools that make outsourcing to financial service providers a savvy move. It also allows you to tap into the expertise of an established team while minimizing what it costs for your startup. As Shah points out, “In-house financial hires come with recruitment costs, salaries, and training. Outsourcing offers a cost-effective alternative, ensuring startups can allocate resources where they matter most.”
Your options for outsourcing
You have a few different paths you can explore to get the financial support your company needs. You might choose to outsource to a:
You can probably guess by the job title that this person’s main responsibility is staying on top of your company’s books. This can be more efficient for your company in two ways. As Shah explains, “Outsourcing financial functions like accounting not only saves time but also reduces the financial burden, enabling them to invest in growth.”
Some companies do choose to handle their accounting internally, especially in the early stages. But as you scale, a bookkeeper can fulfill the key function of making sure your company’s finances are properly tracked, categorized, and reconciled — all without being a drain on company time or money.
While a bookkeeper deals in the very granular details of your company’s finances, an accountant has more elevation. As a result, they can serve as an advisor, helping you explore tax savings and financial strategies that can help your company succeed.
Many companies go a long time before they hire an internal accountant because outsourcing to a certified public accountant (CPA) is such an effective way to get the required financial guidance.
One caveat here: if you do outsource to an accountant, make sure they understand your industry. Someone who’s only ever worked with brick-and-mortar retail businesses might struggle to properly account for a SaaS company, for example. And since tax law is complex and ever-changing, working with an accountant who has expertise in your field can help you get the most streamlined, advantaged accounting possible.
A fractional CFO
You don’t necessarily need to hire a full-time chief financial officer. Instead, a fractional CFO can give you the high-level expertise your company needs without the major overhead of a C-suite hire.
“Outsourcing financial services provides the agility to scale up or down as needed, making it a smart choice for cost-conscious entrepreneurs,” Shah points out. If you think your company is at the point where it would benefit from a CFO but you’re not ready to commit to the major outlay of that full-time hire, outsourcing keeps you agile. You can ramp up that person’s hours as your need grows or scale them back if you enter a lean season. You get a seasoned financial expert without tying your company to any major contract or hefty compensation package.
The benefits of outsourcing
Whichever financial services you decide to outsource, you’ll get:
- More money. What you’d pay to contract someone out for your financial services will almost always be less than what you’d pay an internal hire. And that’s true even if you only look at that person’s salary or hourly wage. Hiring an employee also means taking on the associated tax liabilities, recruiting costs, benefits, and more. At the end of the day, if you want to keep more of your money available at your tech company, outsourcing can help you accomplish that goal.
- More time. Not only does an internal hire represent a significant chunk of overhead, but they also generally require onboarding. And in the financial services world, you’ll want them to get continuing education to stay on top of the latest in tax law and other must-know areas, too. Conversely, when you outsource, you can expect the financial pro you choose to already know the ropes. They should be able to dive in head-first, asking fewer questions and working more efficiently to help your company keep moving forward.
- More expertise. The more experience an individual has, the more they expect to be paid. When you’re hiring internally, you might feel torn between choosing someone who has the knowledge you want and choosing someone who will accept the salary that fits your budget. But when you outsource — especially for higher-level positions like your CFO — you can get someone with a deep well of expertise at a fraction of the cost.
If you want to explore outsourcing your financial services, let’s talk. Our team has helped countless tech startups scale by providing the high-level, specialized financial services they need, including bookkeeping, accounting, and fractional CFO services. To explore how we can come alongside you and support your success, schedule a call with us or shoot us an email.